SBA Publishes the PPP Loan Forgiveness Application

The U.S. Small Business Administration (SBA) just released the Paycheck Protection Program forgiveness rules through the publishing of the PPP Loan Forgiveness Application. With worksheets and instructions, the SBA has given employers a better understanding of how the forgiveness application process will go.

So, what did we learn?  Here are the big takeaways.

  • Payroll and non-payroll costs may be incurred or paid during the covered period or alternative payroll covered period. Under the CARES Act and prior FAQs, it required that to be forgiven, expenses had to be incurred and paid during the period.  So, payroll costs and non-payroll costs may be paid outside of their applicable periods as long as they are paid on or before the first applicable due date immediately following the end of the applicable period for such costs.
  • The process to request forgiveness is spelled out. A borrower will submit its PPP Loan Forgiveness Application to its SBA lender (probably an online process), along with various supporting documentation (i.e. PPP Schedule A, Calculation form, documentation verifying cash compensation and non-cash compensation benefit payments for each employee, documentation of full-time equivalent employees during the covered period and proof of non-payroll cost arrangements in place prior to February 15, 2020, and amounts paid).
  • Demographic information is requested (but voluntary).
  • Documentation from the PPP Loan process must be retained for 6 years after the date the loan is forgiven or repaid in full.
  • The Alternative Payroll Covered Period only applies to payroll costs (not non-payroll costs).
  • It is likely advantageous to wait until after June 30, 2020, to submit a PPP Application for Forgiveness since the salary/hourly wage reduction safe harbor and FTE reduction safe harbor are calculated as of June 20, 2020.
  • Your loan forgiveness amount can be calculated using the Worksheet attached to the Loan Forgiveness Application, and the Worksheet can be used to determine if the salary/wage safe harbor of the FTE reduction safe harbor are met.

Will forgiveness be reduced if employees refuse to return to work?

  • No, but an employer needs to make a good faith written offer to rehire during the covered period and the employee needs to reject the offer. Also, employees that voluntarily resign, request reduced hours, or are fired for cause, are entered as FTE reduction exceptions and they will not reduce your loan forgiveness.

Stay tuned for more information published by the SBA on this important topic.

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